HFF Analysis of the November 2017 BLS Employment Report

Monday, December 11, 2017

HFF is pleased to report on the latest employment expansion statistics from November 2017. Our research team analyzes trends and data to give readers a better view into the current state of the economy and how employment is being affected.

Employment Expansion

The U.S. added a higher than expected 228,000 jobs in November, and October figures were revised downward from 261,000 to 244,000. Payroll creation has averaged 197,035 since October 2010, marking the 86th month of consecutive growth. The period of monthly gains is about three years longer than the prior longest streak from 1986 to 1990.

The Unemployment Rate remained unchanged from the prior month at 4.1 percent, the lowest level since December 2000. Holiday season is off to a solid start. Retailers have struggled for much of the year as they fight off competition from e-commerce, but the sector seasonally added nearly 19,000 jobs in November, which is an increase compared to last November when the economy lost nearly 13,000 retail jobs. U.S. manufacturers have been spurring job growth since the summer, increasing their payrolls 27,000 per month on average. This is the highest increase since April 2012. The strong economic data further solidifies the expected rate hike the Fed will decide on at their December meeting next week.

Average Monthly Payroll Creation Slowing

The current expansion cycle similar to 1991 to 2000 and greater than the 2004 to 2007 expansionary period, but only after a significantly delayed recapture of the nation’s previous employment peak.

Attractive Job Growth Cooling

The U.S. created 2.16 million jobs in 2016, the smallest gain for a calendar year since 2011. The last six years’ job growth is on par with the expansionary period from 1992 to 1995.

In 2016, the U.S. created 2.16 million jobs, but nearly 32 percent of private-sector job gains came from construction, manufacturing, retailers, hotels, restaurants and temporary help agencies, all typically low-paying sectors. Professional Business Services, the industry sector most closely aligned with office-using employment, experienced expansion of 548,000 jobs in the year ending November 2017.

Fortunately, Temporary Staffing only accounted for 116,000 (approximately 21 percent) of these positions. Temporary Staffing is slowing; however, implying hesitance in hiring the lowest-cost employees companies can find in tentative expansions. Education and Health Services, which has performed well throughout the downturn being a recession-resistant industry, expanded by 471,000 jobs in the year ending November 2017. Mining and Logging continues to undermine headline growth but continued to grow positive this month with approximately 64,000 jobs being added in the year ending November 2017.

Unemployment Rate

The Underemployment Rate augments the Unemployment Rate to include anyone marginally attached to the labor force that is either not employed or employed only part time. Fortunately, the Underemployment Rate has descending from a recent high of just over 17 percent; however, the spread between the two rates is near an all-time high and shows no sign of rapid compression. The Unemployment Rate remained unchanged from the prior month at 4.1 percent in November, the lowest level since December 2000. The Underemployment Rate came in at eight percent in November, a 10 basis point increase from the prior month.

Wage Growth

As the labor force approaches “full employment," much attention has been cast to wage growth. The past three recessions were preceded by a period of FOMC tightening. Average hourly earnings growth exceeded four percent in each of these periods as overall economic activity became reflected in strong wage growth. With the current year-over-year percent wage growth registering approximately 2.5 percent, one could argue overall economic activity has not yet reached levels that precede recessionary periods (often accompanied if not triggered by FOMC tightening to counter inflationary forces).

Sources: HFF Research, Bureau of Labor Statistics, Department of Labor, Bloomberg

Prepared by HFF Research Analysts Aziza Rehmatulla and Morgan Allen and HFF Managing Director of Research Jimmy Hinton

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